Renewing the power

Having set an ambitious target of 175 GW of renewables including 100 GW of solar energy by 2022, the renewable sector in the country is hoping to inch closer to its energy goals, explores Garima Pant through the sector report

The energy demand is on an upward curve, irrespective of the government that comes in or the geographical space the populace is living in. And the native supplies will not be able to keep pace with this rising demand, making it all the more essential to tap in those alternate sources of energy and reduce the ever-increasing stress on the environment.

As per BP’s Energy Outlook 2019, India accounts for more than a quarter of net global primary energy demand growth between 2017-2040. 42 per cent of this new energy demand is met through coal, implying CO2 emissions roughly double by 2040 owing to strong population growth and economic development. “Renewable energy consumption surges from ~20 Mtoe today to ~300 Mtoe by 2040 – concentrated mainly in the power sector and driven largely by growth in solar capacity. Yet despite this growth in renewables, coal continues to dominate India’s power generation mix, accounting for 80 per cent of output by 2040,” the report further states.

Having committed itself to attaining the target of having 175 GW of renewables including 100 GW of solar energy by 2022, the country is hoping to become one of the largest developers of renewables globally. According to BP’s Energy Outlook 2019, country’s renewable market share will increase to 15 per cent up from the current 3-4 per cent. With an abundance of sunshine on the country, solar energy is being looked at as the driver of the country’s ambitious renewable energy expansion plans. This is proven by recent statistics by the Institute of Energy Economics and Financial Analysis (IEEFA) that indicate that the country’s shift away from coal and towards greener fuels, along with the decline in European coal consumption, is slated to diminish the export volumes of the fuel from US in the current year.

Year 2030 could see Renewables as the favoured source of energy with tariffs ranging between Rs. 1.9-2.6 per unit for wind and solar power and storage cost going down by around 70 per cent, according to report by Energy Transition Commission (ETC India). The report further projected that the cost of wind power will be between Rs. 2.3-2.6/kWh and of solar power in the range of Rs. 1.9-2.3/kWh by 2030.

Number Games

According to the Minister of State (I/C) for New and Renewable Energy and Power Shri R. K Singh, a total of 74.79 GW of renewable energy capacity has been installed in the country till end of December 2018, which includes 25.21 GW from Solar, 35.14 GW from Wind, 9.92 GW from Bio power and4.52 GW from Small Hydro Power. According to ministry data, the Government has released an amount of ` 3584.08crore in the form of Central Financial Assistance (CFA) during 2018-19 (up to 5/2/2019) under various renewable energy schemes/programmes of the Ministry of New and Renewable Energy in the country. According to the Ministry, a total of 81.15 billion units (BU) of power have been generated in the year 2018-19 (up to October 2018) from all renewable energy sources.

It is the private sector that has taken the lead in the implementation of the Renewable Energy projects. According to the ministry statistics, the steps taken by the Government to support the renewable energy sector include: fiscal and promotional incentives such as capital subsidy, accelerated depreciation, waiver of Inter State Transmission System (ISTS) charges and losses, viability gap funding (VGF) and permitting Foreign Direct Investment up to 100 per cent under the automatic route. Also, to ensure cheaper generation of renewable energy, projects are awarded through transparent bidding process i.e. through e- reverse auction. The Government has issued standard bidding guidelines to enable the distribution licensees to procure power at competitive rates in cost effective manner.

According to the Global Status Report-2018 of REN21 (Renewable Energy Policy Network for the 21st Century), India ranked 5th in Renewable Power Capacity (including hydropower) and 4th (not including hydropower) at the end of 2017.

As per the Ministry of New and Renewable Energy (MNRE), a total of 7103.28 MW of renewable energy capacity was added during the year 2018-19, taking cumulative installed renewable energy capacity to GW 76.87 GW as on February, 2019 that comprises 35.32 GW from Wind power, 27.09 GW from Solar Power, 9.92 GW from Bio Power and 4.54 GW from Small Hydro Power. Further, projects of capacity58.77GW are under implementation or already bid out. An expenditure of ` 4208.36 crores was incurred up to February, 2019, which is around 81.77% of the total Budgetary allocation for the Ministry. Some of the major highlights of the sector include:

(i)CCEA in its meeting held on 19/2/2019 has approved the KUSUM scheme for providing 17.5 lakh stand alone Solar Pumps 1000MW, Solarization of 10 lakh grid connected Pumps and installation of1000 MW small solar power plants up to 2MW capacity by farmers.

(ii)CCEA has also approved Ph-II of the Rooftop solar Programme to achieve 40 GW RTS capacity in the country by 2022. Under this Programme central financial assistance will be provided for residential sector and incentives for Discoms.

Hide and Seek

While the target has been touted as ambitious and the road towards achieving this renewable energy number has been facing a number of roadblocks including policy issues pointing towards cancellation of auctions of tenders, rights to land use and tariffs, the end destination looks like a distant wish. And industry reports point towards the growing distance between the ambition and the reality. Despite an active tender pipeline, investors have been cautious in bidding for renewable power capacity projects with rising interest rates, depreciation in the currency and the burden of safeguard duties on imported solar modules being the primary culprits for this caution.

CRISIL Research expects solar power capacity additions of 48-50 GW between fiscals 2019 and 2023. “However, developer sentiment has been negatively impacted by the lack of clarity on several policy issues and arbitrary bid cancellations, which is contrary to a supportive policy stance from the government,” cites the research.

Over fiscals 2017 to 2019, while previously tendered capacities continued to be commissioned apace, certain risks to future project implementation cropped up as there were frequent bid cancellations, lack of clarity on GST procedures, and cost pressure from the imposition of the safeguard duty on imported cells/modules. The report says, “while, GST clarity was lacking for over a year with a final decision taken in December by the GST council, it ended with an increase in taxation compared to what was expected by the industry. Similarly, the safeguard duty has turned out to be a double whammy of sorts, impacting costs of solar power projects and not resulting in any significant off take for the domestic manufacturing sector. This was coupled by cancellation of bids post auctions as state utilities / SECI found tariffs to be higher than expectations. Close to 4.7 GW was cancelled in such a manner over March - December 2018”.

With the renewable energy domain being extremely dependent on policy support, slightest of uncertainty on that front can lead to robust negative consequences, indicates CRISIL Research. “Hence, considering the current regulatory haze, outlook has been revised downward. We continue to monitor the same and remain aware of a possibility of upsides to our call, once regulatory risk is mitigated to an extent. Further, adequate land availability, timely implementation of grid infrastructure, and the ability of players to raise low cost funds will also be crucial enablers,” indicates the research. The study also expects capacity additions to grow, albeit moderately over the next 5 years led by allotment of CTU connected capacities, better technology and states raising their Non-Solar RPO targets. However, incremental challenges pertaining to wind site/land availability, grid connectivity and cost of capital are key constraints to additions at present,” shares the research report. While building of ramping up the transmission infrastructure is the need of the hour, what comes with it is the need to ensure grid digitization to ensure greater transparency across the entire value chain.

Solar Boost

According to Mercom India Research, solar installations went down by 15 percent year-over year but total installations were still the second largest to date in a year. While large-scale solar installations in 2018 accounted for 6,608 MW, in 2018, rooftop installations totaled 1,655 MW a strong 66 percent year-over-year growth. As a maiden achievement, solar accounted for more than 50 percent of new power capacity added in India. Q4 of the year 2018 saw an auction of approximately 2.9 GW of solar projects. Andhra Pradesh was the top installer of large-scale solar in the fourth quarter closely followed by Madhya Pradesh.

While the government is ensuing reforms to ease availability of land and subsequent measures to push for the growth of renewable sector in the country, time and the upcoming elections will tell the pace at which the ambitious target will be met or face further delays.